Global IT spending forecast to fall 7% amid COVID-19 cuts

By July 13, 2020Bitcoin Business
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Global spending on information technology will fall 7.3% this year to $3.5 trillion as the coronavirus pandemic curtails economic activity, research firm Gartner forecast Monday.

IT spending is poised to bounce back modestly next year, in a pattern Lovelock describes as “a Nike swoop,” but will not exceed 2019 levels until at least 2023. Some categories of IT spending, such as purchases of devices—everything from laptops to mobile phones to printers—probably reached a high-water mark in 2018 that they may never hit again, he said.

Gartner is predicting that this category of IT spending will be the worst hit this year, crashing more than 16%, on top of a 0.3% decline last year. It forecasts that spending will recover 6.2% in 2021.

When it comes to consumer hardware devices, the issue is not simply tied to economies frozen by the pandemic. The segment has, in many ways, become a victim of its own success and is now facing strong ongoing headwinds owing to the high global penetration rates these technologies have already achieved.

“Most people who want a cell phone have one; most people that want or need a laptop have one,” he said.

The result is the market is almost entirely made up of spending on upgrades and replacements, purchases that are easy to delay when budgets get tight. In addition, the latest versions of these products are so capable that users are finding they don’t need to upgrade them as often as in the past.

And while many large corporations are reporting that the pandemic is causing them to accelerate their “digital transformation” plans, investing more in cloud-based technologies and artificial intelligence, Lovelock said that the increases in spending on these relatively niche areas are not enough to make up for the widespread curtailment of more run-of-the-mill IT spending. The reduction in staff—through layoffs and furloughs—is also allowing many firms to reduce overall technology spending significantly, he said.

Gartner forecasts that spending on data center systems will fall 10.6% this year after having barely grown in 2019. It is then projecting a 6.2% increase in 2021.

Enterprise software, which had been a strong performer in 2019, growing 11.7%, will suffer a 5.7% decline this year, the firm projects. But it should recover about 7.4% next year, Gartner says.

IT services, which account for more than $1 trillion of total spending, is expected to fall 6.8% this year, after having gained almost 5% last year. It will then recover 5.5% in 2021, according to the research firm.

Finally Gartner forecasts that communications services, the largest IT spending category, amounting to more than $1.3 trillion, will slip 3.3% and recover about 3% in 2021.

But these broad categories mask significant long-term trends, some of which have indeed been given a massive boost from the pandemic. For instance, spending on desktop-as-a-service, a cloud-based solution that allows workers to have a virtual desktop and files that they can immediately call up on any device anywhere in the world, is expected to double this year, Lovelock said.

The movement of computing functions away from on-premises servers and into the cloud is also continuing. Lovelock notes that in 2008, the vast majority of computing power was in the form of servers that companies owned themselves. By 2024, Gartner projects that 60% of all the world’s computing power will exist in data centers run by a handful of large cloud computing providers.

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